Risk-off gripped the financial markets in Asia this Wednesday, as fresh trade tensions around the US and Japan spooked the market sentiment and dampened the demand for the higher-yielding/ risk assets. The Asian equities dropped to fresh 14-month lows while the US dollar caught a fresh bid-wave and recovered across its main competitors after the overnight drop.
The Antipodeans reached fresh 30-month lows amid risk-off while downbeat Australian Westpac consumer confidence data added to the weight on the Aussie. The Yen bulls regained poise, pushing the USD/JPY pair lower to 111.50 levels. Both the EUR and the pound were under pressure, despite the latest Brexit optimism and upbeat UK jobs data. Meanwhile, both the CAD and oil derived support from some progress on the NAFTA talks. Gold prices, on the other hand, kept losses below the $ 1200 mark, as Fed’s tightening plans continue to weigh.
Main topics in Asia
Gold catches late NY bid on NAFTA headlines, but . . .
US 2Y treasury yield jumps to highest since 2008
China to use 'more supportive measures' to promote deleveraging: China Daily - Reuters News
Russia’s Novak: Russia has potential to add 300,000 bpd within 12 months
AUD bearish news: iron ore market could be oversupplied for next 2-3 years, says S&P
Japan PM Abe, Chinese President Xi agree to arrange summit in China in October
EU Official: Juncker to hold firm on Brexit terms, offer close partnership with the UK
Key Focus ahead
Wednesday’s EUR calendar is a quiet affair after a busy start to the week, as the industrial figures from the Euroland remain the only relevant economic release that will be due at 0900 GMT. The UK docket is absolutely data empty and hence, markets will look forward to the Brexit and trade-related headlines for some trading impetus until the release of the US PPI data due at 1230 GMT, which are expected to arrive stronger for the month of August. The US calendar has nothing much to offer except for the EIA crude stockpiles data and Fed’s Beige book later on Wednesday.
Apart from the data, Fedspeaks will be closely heard, as the FOMC members, Bullard and Brainard are likely to hit the wires at 0930 GMT and 1645 GMT respectively.
EUR/USD to closely track 2Y yield spread and trade related headlines
The common currency could remain on the defensive if the yield spread continues to rise today. The European data docket is thin, hence the focus remains on the trade-related headlines and the sentiment in the equity markets.
GBP/USD: Bears won’t give up amid trade woes, higher T-yields, BOE in focus
The GBP/USD pair keeps the offered tone intact amid widespread risk-aversion and monetary policy divergence, as we progress towards the European opening bells.
Key US data for this week - Nomura
Analysts at Nomura explained their outlook for the next key US data this week.
Australian job: Impact leans towards AUD upside rather than downside – TDS
In its preview of the Australian labour market report, analysts at TD Securities (TDS) highlights the impact of this report on the Australian dollar.
ECB Preview: No change in the message or the tone is the most likely outcome - Barclays
The Barclays Research Team offers a sneak peek at what to expect from Thursday’s European Central Bank (ECB) monetary policy decision due to be announced at 1145 GMT.
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